June 30, 2008

Costs Crippling Some Projects, Forcing Others to Get Creative

The price volatility of construction commodities, combined with price spikes in other materials, has some building owners opting to delay projects.

"They've put jobs on the shelf for while, but costs aren't going to come down," said Terry Vaughn, an estimator for Perkey Steel.

But that isn't because resources are in short supply.

"I don't know, but we may be seeing some artificial prices out there," he said.

Some projects are moving ahead, however.

Terry McHale, director of facilities for The Broadmoor Hotel, said that construction of 39 cottage suites, a 19,000-square-foot underground golf cart facility, a tennis building scheduled for completion during 2009, and renovation of Broadmoor West have forced him to look at new ways of construction budgeting.

"We've gone to stick frame rather than steel construction in a couple of cases," he said. "When we built the Broadmoor Hall, for example, steel prices were going through the roof so we did some early buyouts to get a better price."

But McHale acknowledged that isn't always possible, and on the latest projects, he's including nearly $1 million in escalation provisions in the budget, something he has never done before.

"We're also partnering early in the process with our general contractors, Nunn Construction and Torix to get their design and value engineering input," he said. "Escalation planning has become as much a part of the discussion as labor and benefits. To think a year ago I couldn't spell 'escalation.'"